India’s mining tax shake-up: Why mineral-rich states are worried

India’s parliament has approved a sweeping overhaul of mining taxation rules, tightening the Centre’s control over how states can levy charges on mineral resources and triggering pushback from several mineral-rich regions that say their fiscal autonomy is being weakened.

The Mines and Minerals (Development and Regulation) Amendment Bill, 2026, passed on Thursday and now awaiting presidential assent, restricts states from introducing new taxes, cesses or levies on mineral rights and mineral-bearing land unless explicitly permitted by the federal government.

The law also includes a retrospective provision that could invalidate certain state-imposed levies that were notified earlier but have not yet been collected or deposited, raising concerns in states that had been counting on pending mining-related revenues.

The Centre says the reform is aimed at creating a uniform national framework for mining taxation and reducing regulatory uncertainty for investors in a sector critical to steel, power and infrastructure supply chains.

Mines Minister G Kishan Reddy told parliament that states’ share of mineral revenue has risen to about 85 per cent from 65 per cent in 2014–15, arguing that the new law does not reduce their overall earnings. He said states continue to retain control over minor minerals, while the Centre regulates major minerals such as coal, iron ore, limestone and copper.

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But several states say the issue is not just revenue sharing, but the loss of independent taxing powers.

Odisha, Jharkhand and Chhattisgarh, all heavily dependent on mining, have raised concerns over what they see as shrinking fiscal space. Odisha is reportedly facing potential exposure of more than Rs 1 lakh crore in disputed mining-related claims, while Jharkhand’s chief minister has called the law a “black law” and warned of protests if it is not withdrawn.

Kerala, though not a major mining state, has also opposed the amendment, saying it could encroach on constitutionally protected state powers over land and revenue. The state is exploring legal options.

The dispute follows a 2024 Supreme Court ruling that affirmed states’ authority to tax mineral rights and clarified that royalty payments are not a tax. That judgment had opened the door for large retrospective claims by states, significantly altering the fiscal landscape of the mining sector.

The new amendment effectively seeks to reset that trajectory by limiting future state levies and curbing certain pending claims.

The Centre argues that fragmented taxation across states has created uncertainty for mining companies and discouraged long-term investment. A more uniform system, officials say, would improve predictability and support domestic production of key industrial inputs.

Industry groups have largely welcomed the move, saying it could reduce compliance complexity and litigation risk.

However, the political fallout is still unfolding. Mineral-rich states are weighing legal challenges, and opposition leaders have signalled possible protests, setting up a potential Centre–state confrontation over control of natural resources.

The reform highlights a broader federal question in India: how to balance national standardisation in resource governance with the fiscal rights of states that sit atop much of the country’s mineral wealth.